QE is often implemented when interest rates over near zero and economic growth is stalled. Central banks have limited tools, like interest rate reduction, to influence economic growth. Without the ability to lower rates further, central banks must strategically increase the supply of money.

To executive QE, central banks buy government bonds and other securities, injecting bank reserves into the economy. Increasing the supply of money lowers interest rates further and provides liquidity to the banking system, allowing banks to lend with easier terms.


The time lag between the increase in the money supply and the inflation rate is generally 12-18 months.


Critics have argued that QE is effectively a form of money printing and point to examples in history where money printing has led to hyperinflation. However, proponents of QE claim that banks act as intermediaries rather than placing cash directly in the hands of individuals and businesses so QE carries less risk of producing runaway inflation.


Because marriage is a legal and financial decision — the government couldn’t care less how in love you are — you need to know what risks you are taking by binding yourself to another person.


Bank-issued credit makes up the largest proportion of credit in existence. The traditional view of banks as intermediaries between savers and borrowers is incorrect. Modern banking is about credit creation. Credit is made up of 2 parts, the credit (money) and its corresponding debt, which requires repayment with interest. The majority (97% as of December 2013) of the money in the UK economy is created as credit.

When a bank creates credit, it effectively owes money to itself. If a bank issues too much bad credit, the bank will become insolvent; having more liabilities than assets. That the bank never had the money to lend in the first place is immaterial — the banking license affords bank to create credit — what matters is that a bank’s total assets are greater than its total liabilities and that it is holding sufficient liquid assets — such as cash — to meet its obligations to its debtors. If it fails to do this it risks bankruptcy or banking license withdrawal.


Proponents of these theories sometimes emphasize that money and credit/debt are the same thing, seen from different points of view. Proponents assert that the essential nature of money is credit (debt), at least in eras where money is not backed by a commodity such as gold. Two common stands of thought within these theories are the idea that money originated as a unit of account for debt, and the position that money creation involves the simultaneous creation of debt.


Finance thus studies the process of channeling money from savers and investors to entities that need it. Savers and investors have money available which could earn interest or dividends if put to productive use. Individuals, companies and governments must obtain money from some external source, such as loans or credit, when they lack sufficient funds to operate.


An entities where income is less than expenditure can raise capital usually in 1 or 2 ways: (i) by borrowing in the form of a loan (private individuals), or by selling government or corporate bonds; (ii) by a corporation selling equity, also called stock or shares.


The lending is often indirect, through a financial intermediary such as bank, or via the purchase of notes or bonds in the bond market.


Banks allow borrowers and lenders, of different sizes, to coordinate their activity.

Finance allows production and consumption in society to operate more independently from each other. Without the use of financial allocation, production would have to happen at the same time and space as consumption.


Seigniorage: Profit made by a government by issuing currency. The difference between the face value of notes and coins, and their production costs.


It’s basically an accounting trick. Banks create money. They don’t lend it. When a bank gives out what is called a loan, it basically pretends that you have deposited the money. It has to invent the liability. This is how the money supply is created.


By far the largest role in creating money is played by the banking sector. When banks make loans they create additional deposits for those that have borrowed the money.


GDP: The market value of all final goods and services produced in a country in a given period.


Many western countries heavily subsidize agricultural production, which has the effect of keeping prices and inflation low.


While both the World Bank and the IMF work towards global economic stability and development, they have distinct focuses and functions. The World Bank concentrates on long-term development projects to reduce poverty and promote sustainable development, while the IMF focuses on ensuring global financial stability, providing short-term financial assistance during crises, and offering policy advice to member countries.


Capitalism is an economic system in which private individuals or businesses own capital goods. At the same time, business owners (capitalists) employ workers (labor) who receive only wages; labor doesn’t own the means of production but instead uses them on behalf of the owners of capital.

The production of goods and services under capitalism is based on supply and demand in the general market—known as a market economy—rather than through central planning—which is known as a planned economy or command economy.

The purest form of capitalism is free-market or laissez-faire capitalism. Here, private individuals are unrestrained. They may determine where to invest, what to produce or sell, and at which prices to exchange goods and services. The laissez-faire marketplace operates without checks or controls. Today, most countries practice a mixed capitalist system that includes some degree of government regulation of business and ownership of select industries.


All of the human technology stack is based upon investment. Not merely in the modern, financial, sense, but the investment of effort.

If I am a protohuman, using a stone as a pounding tool, I do not care if you take my stone. I will simply pick up another stone. But if I chip my stone into a spearhead, then I will not let you take my spearhead, because that would take away the effort I have invested.

From the moment humans gained the ability to build and farm, land became something they could invest effort in.

And land ownership became necessary so they would do that.

All of the bullshit ya’ll think is so important: governments, laws, philosophical principles about rights, etc… these are all just tools, possible means of protecting investment.

It doesn’t matter what set of tools you use, so long as they work and investments are protected. If a man can be certain his investments will not be taken away from him by parasites, thieves, and robbers, he will invest. If he is certain that they will, he will not invest.


Capitalism is essentially an economic system in which the means of production (i.e., factories, tools, machines, raw materials, etc.) are organized by one or more business owners (capitalists). Capitalists then hire workers to operate the means of production in return for wages. Workers have no claim on the means of production or on the profits generated from their labor—these belong to the capitalists.


When property isn’t privately owned but rather is shared by the public, a problem known as the tragedy of the commons can emerge. With a common pool resource, which all people can use and none can limit access to, all individuals have an incentive to extract as much use-value as they can and no incentive to conserve or reinvest in the resource. Privatizing the resource is one possible solution to this problem, along with various voluntary or involuntary collective action approaches.


Under capitalist production, the business owners (capitalists) retain ownership of the goods being produced. If a worker in a shoe factory were to take home a pair of shoes that they made, it would be theft. This concept is known as the alienation of workers from their labor.


Capitalism is a system of economic production. Markets are systems of distribution and allocation of goods already produced. While they often go hand-in-hand, capitalism and free markets refer to two distinct systems.


Colonialism flourished alongside mercantilism, but the nations seeding the world with settlements weren’t trying to increase trade. Most colonies were set up with an economic system that smacked of feudalism, with their raw goods going back to the motherland and, in the case of the British colonies in North America, being forced to repurchase the finished product with a pseudo-currency that prevented them from trading with other nations.

It was economist Adam Smith who noticed that mercantilism was a regressive system that was creating trade imbalances between nations and keeping them from advancing. His ideas for a free market opened the world to capitalism.


Capitalism involved reorganizing society into social classes based not on ownership of land, but ownership of capital (in other words, businesses).


Capitalism:

Pros:

  • More efficient allocation of capital resources: Labor and means of production follow capital in this system because supply follows demand.
  • Competition leads to lower consumer prices: Capitalists are in competition against one another, and so will seek to increase their profits by cutting costs, including labor and materials costs. Mass production also usually benefits consumers.
  • Wages and general standards of living rise overall: Wages under capitalism increased, helped by the formation of unions. More and better goods became cheaply accessible to wide populations, raising standards of living in previously unthinkable ways.
  • Spurs innovation and invention: In capitalism, inequality is the driving force that encourages innovation, which then pushes economic development.

Cons:

  • Creates inherent class conflict between capital and labor: While capitalists enjoy the potential for high profits, workers may be exploited for their labor, with wages always kept lower than the true value of the work being done.
  • Generates enormous wealth disparities and social inequalities: Capitalism has created an immense gap between the wealthy and the poor, as well as social inequalities.
  • Can incentivize corruption and crony capitalism in the pursuit of profit: Capitalism can provide incentives for corruption emerging from favoritism and close relationships between business people and the state.
  • Produces negative effects such as pollution: Capitalism often leads to a host of negative externalities, such as air and noise pollution, and these costs paid for by society, rather than the producer of the effect.

The capitalist economy is unconcerned about equitable arrangements. The primary concern of the socialist model is the redistribution of wealth and resources from the rich to the poor, out of fairness, and to ensure equality in opportunity and equality of outcome. Equality is valued above high achievement, and the collective good is viewed above the opportunity for individuals to advance.


Property owners are restricted as to how they exchange with one another. These restrictions come in many forms, such as minimum wage laws, tariffs, quotas, windfall taxes, license restrictions, prohibited products or contracts, direct public expropriation, antitrust legislation, legal tender laws, subsidies, and eminent domain. Governments in mixed economies also fully or partly own and operate certain industries, especially those considered public goods.


Capitalism is an economic and political system where trade and industry are controlled by private owners for profit. Its core principles are: accumulation, ownership, and profiting from capital. In its purest form, capitalism works best when these private owners have assurances that the wealth they generate will be kept in their own pocket. But giving the wealthy free rein to become even wealthier is controversial. Endorsing such behavior without some concessions is unlikely to get many politicians elected.


Tort law is the area of the law that covers most civil suits. In general, any claim that arises in civil court, with the exception of contractual disputes, falls under tort law.

The concept of tort law is to redress a wrong done to a person and provide relief from the wrongful acts of others, usually by awarding monetary damages as compensation. The original intent of tort is to provide full compensation for proved harms.

Lawsuits involving contracts fall under contract law.


Strict liability torts, unlike negligence and intentional torts, are not concerned with the culpability of the person doing the harm. Instead, such cases focus on the act itself. If someone or some entity commits a certain act—for example, producing a defective product—that person or company is responsible for the damage done, regardless of the level of care exercised or their intentions.


Scarcity is so fundamental to economics that scarce goods are also known as economic goods. In economics, scarce goods are those for which demand would exceed supply at a price of zero.


In economics, the concept of scarcity conveys the opportunity cost of allocating limited resources.

Scarce goods are those for which demand would exceed supply if they were free.


In a hypothetical world in which everything of value—from food and water to masterworks of art—were so abundant it had no cost, economists would have nothing to study. There would be no need to make decisions about how to allocate resources, hence no need for theories about the interplay of such decisions and tradeoffs in an economy.

In the real world, on the other hand, all factors of production have a cost and therefore so too does every product. Every input incurs an opportunity cost because it can’t be put to alternate use as a result. This opportunity cost reflects the inputs’ scarcity.


None of the economic definitions of scarcity require a product or resource to be unavailable to be called scarce. In fact, the definition of a market price is one at which supply equals demand, meaning all those willing to obtain the resource at a market price can do so. Scarcity can be used to explain a market shift to a higher price, to compare the availability of economic inputs, or to convey the opportunity cost involved in allocating limited resources.


Rationing is the practice of controlling the distribution of a good or service in order to cope with scarcity. Rationing is a mandate of the government, at the local or federal level. It can be undertaken in response to adverse weather conditions, trade or import/export restrictions, or, in more extreme cases, during a recession or a war.

Rationing risks generating black markets and unethical practices as people try to circumvent the austerity mandated by a ration.


According to the law of supply and demand, when the available supply of a good or service falls below the quantity demanded, the equilibrium price rises, often to unaffordable levels. Rationing can artificially depress the price by putting constraints on demand.


The 1973 Arab oil embargo caused gasoline supplies in the U.S. to plummet, pushing up prices. The federal government responded by rationing domestic oil supplies to states, which in turn implemented systems to ration their limited stocks.

In some states, cars with license plates ending in odd numbers were only allowed to fill up on odd-numbered dates, for example, while cars with even numbered plates were only allowed to fill up on even-numbered days. These responses kept gas prices from spiking further but led to long lines.


Faced with the choice of allowing the prices of basic necessities to rise inexorably, or imposing rations, governments typically choose the latter; policymakers in such circumstances must choose among policies that are all difficult and risk some negative impact.


In Cuba in 2019, a ration book entitled an individual to small amounts of rice, beans, eggs, sugar, coffee, and cooking oil for the equivalent of a few cents in the United States.

Since that is not enough to survive, Cubans must purchase additional supplies on the open market, where the price of rice is around 20 times higher. Additionally, there are limits on the number of higher-quality items Cubans can purchase on the open market, such as chicken.


Black markets often spring up when rationing is in effect. These allow people to trade rationed goods they may not want for ones they do.

Black markets also allow people to sell goods and services for prices that are more in line with demand, undermining the intent of rationing and price controls, but sometimes alleviating shortages.


Quotas focus on limiting the quantities (or, in some cases, cumulative value) of a particular good that a country imports or exports for a specific period, whereas tariffs impose specific fees on those goods. Governments design tariffs (also known as customs duties) to raise the overall cost to the producer or supplier seeking to sell products within a country. Tariffs provide a country with extra revenue and they offer protection to domestic producers by causing imported items to become more expensive.


For countries, gross domestic product (GDP) can be thought of as a measure of income (a flow variable), though it is often erroneously referred to as a measure of wealth (a stock variable).


The top 1% of wage earners hold 31.9% of wealth in the United States as of June 29, 2022.


Due to its practical challenges and poor track record, socialism is sometimes referred to as a utopian or “post-scarcity” system, although modern adherents believe it could work if only properly implemented.

They argue that socialism creates equality and provides security—a worker’s value comes from the amount of time they work, not in the value of what they produce—while capitalism exploits workers for the benefit of the wealthy.


There are differences between socialism and communism, however. In fact, communism can be thought of as a strict and all-encompassing version of socialism.

Under communism, all property is communally owned; private property doesn’t exist. Under socialism, individuals can still own private property.

And according to communist theory, workers should be given what they need, while under socialist theory, they are to be compensated for their level of contribution to the economy.


Proponents of market capitalism counter that it is impossible for socialist economies to allocate scarce resources efficiently without real market prices. They claim that the resultant shortages, surpluses, and political corruption will lead to more poverty, not less. Overall, they say, socialism is impractical and inefficient, suffering in particular from two major challenges.

The first challenge for socialism, widely called the “incentive problem,” is that no one wants to be a sanitation worker or wash skyscraper windows. That is, socialist planners cannot incentivize laborers to accept dangerous or uncomfortable jobs without violating the equality of outcomes.

Far more serious is the calculation problem. Socialists are unable to perform any real economic calculation without a pricing mechanism. Without accurate factor costs, no true accounting may take place. Without futures markets, capital can never reorganize efficiently over time.


A technocracy is a model of governance wherein decision-makers are chosen for office based on their technical expertise and background. A technocracy differs from a traditional democracy in that individuals selected to a leadership role are chosen through a process that emphasizes their relevant skills and proven performance, as opposed to whether or not they fit the majority interests of a popular vote.

Reliance on technocracy can be criticized on several grounds. The acts and decisions of technocrats can come into conflict with the will, rights, and interests of the people whom they rule over. This in turn has often led to populist opposition to both specific technocratic policy decisions and to the degree of power in general granted to technocrats. These problems and conflicts help give rise to the populist concept of the “deep state”, which consists of a powerful, entrenched, unaccountable, and oligarchic technocracy which governs in its own interests.


A liquidity trap is an economic scenario in which households and investors sit on cash, either in short-term accounts or literally as cash on hand.

They might do this for a few reasons: they have no confidence that they can earn a higher rate of return by investing, they believe deflation—or falling prices—is on the horizon (cash will increase in value relative to fixed assets), or deflation already exists. All three reasons are highly correlated, and under such circumstances, household and investor beliefs become a reality.

In a liquidity trap, low-interest rates, as a matter of monetary policy, become ineffective. People and investors don’t spend or invest. They believe goods and services will be cheaper tomorrow, so they wait to consume, thinking they can earn a better return by sitting on their money versus investing it. The Bank of Japan’s discount rate was 0.5% for much of the 1990s, but it failed to stimulate the Japanese economy while deflation persisted.


Another way to break out of the liquidity trap is to “re-inflate” the economy by increasing the actual supply of money instead of targeting nominal interest rates. A central bank can inject money into an economy without regard for an established target interest rate (such as the fed funds rate in the U.S.) through the purchase of government bonds in open-market operations.

This is when a central bank purchases a bond, in which case it effectively exchanges it for cash, which increases the money supply. This is known as the monetization of debt. (It should be noted that open-market operations are also used to attain and maintain target interest rates, but when a central bank monetizes the debt, it does so without regard for a target interest rate.)

In 2001, the Bank of Japan began to target the money supply instead of interest rates, which helped moderate deflation and stimulate economic growth. However, when a central bank injects money into the financial system, banks are left with more money on hand but also must be willing to lend that money out. This brings us to the next problem Japan faced: a credit crunch.

A credit crunch is an economic scenario in which banks have tightened lending requirements and, for the most part, do not lend.


Calculated risk-taking and lending represent the life-blood of a free market economy. When capital is put to work, jobs are created, spending increases, efficiencies are discovered, leading to higher productivity and economic growth. On the other hand, when banks are reluctant to lend, it is difficult for the economy to grow.

In the same manner that a liquidity trap leads to deflation, a credit crunch is also conducive to deflation as banks are unwilling to lend. Therefore, consumers and businesses are unable to spend, causing prices to fall.


Unfortunately, re-inflating an economy isn’t easy, especially if banks are unwilling or unable to lend. Notable American economist Milton Friedman suggested that avoiding a liquidity trap can be achieved by bypassing financial intermediaries and giving money directly to individuals to spend. This process is known as “helicopter money” because the theory is that a central bank could drop money from a helicopter.


Transaction costs are the total costs of making a transaction, including the cost of planning, deciding, changing plans, resolving disputes, and after-sales. Therefore, the transaction cost is one of the most significant factors in business operation and management.


Transaction costs can be divided into 3 broad categories:

  • Search and information costs are costs such as in determining that the required good is available on the market, which has the lowest price…
  • Bargaining and decision costs are the costs required to come to an acceptable agreement with the other party to the transaction, drawing up an appropriate contract and so on.
  • Policing and enforcement costs are the costs of making sure the other party sticks to the terms of the contract, and taking appropriate action (often through the legal system) if this turns out not to be the case.

Ngày 14 tháng 5 năm 1997, đồng baht Thái bị tấn công đầu cơ quy mô lớn. Ngày 30 tháng 6, thủ tướng Thái Lan Yongchaiyudh tuyên bố sẽ không phá giá baht, song rốt cục lại thả nổi baht vào ngày 2 tháng 7. Baht ngay lập tức mất giá gần 50%. Vào tháng 1 năm 1998, nó đã xuống đến mức 56 baht mới đổi được 1 dollar Mỹ. Chỉ số thị trường chứng khoán Thái Lan đã tụt từ mức 1.280 cuối năm 1995 xuống còn 372 cuối năm 1997. Đồng thời, mức vốn hóa thị trường vốn giảm từ 141,5 tỷ USD xuống còn 23,5 tỷ USD. Finance One, công ty tài chính lớn nhất của Thái Lan bị phá sản. Ngày 11 tháng 8, IMF tuyên bố sẽ cung cấp một gói cứu trợ trị giá 16 tỷ dollar Mỹ cho Thái Lan. Ngày 20 tháng 8, IMF thông qua một gói cứu trợ nữa trị giá 3,9 tỷ dollar.


Khủng hoảng tài chính Đông Á làm người ta nhận thức rõ hơn sự cần thiết phải có một hệ thống tài chính - ngân hàng vững mạnh, minh bạch. Điều này thôi thúc Quỹ Tiền tệ Quốc tế và Ngân hàng Thanh toán Quốc tế đổi mới các quy chế về ngân hàng và các tổ chức tín dụng nói chung.

Chính phủ nhiều nước đang phát triển cho rằng các dòng vốn đầu tư gián tiếp nước ngoài và vốn vay ngân hàng nước ngoài có thể đem lại những tác động bất lợi với nền kinh tế của họ. Do đó, nhiều chính phủ đã ban hành những quy chế nhằm điều tiết các dòng vốn này.


Is it legal for a business in the United States to refuse cash as a form of payment?

There is no federal statute mandating that a private business, a person, or an organization must accept currency or coins as payment for goods or services. Private businesses are free to develop their own policies on whether to accept cash unless there is a state law that says otherwise.

Section 31 U.S.C. 5103, entitled “Legal tender,” states: “United States coins and currency [including Federal Reserve notes and circulating notes of Federal Reserve Banks and national banks] are legal tender for all debts, public charges, taxes, and dues.” This statute means that all U.S. money as identified above is a valid and legal offer of payment for debts when tendered to a creditor.


Few Americans today are surprised at the volatility of real estate markets or at their capacity for quixotic exploitation in sudden “booms.” Indeed, growing rich or at least affluent from the capital gain on a home sale has become a legitimate part of the American dream. But few Americans actually experience an appreciation of double or triple their land values in just a matter of months. Those who do are usually considered as lucky as lottery winners.

But what if it weren’t luck? What if such a spectacular, exponential rise in the values of all land in, say Los Angeles, occurred in only 36 months? What if it were known to have happened as the direct result of a calculated release of hundreds of millions of dollars in speculator funds into that city’s real estate market by all of the nation’s largest banks? What if the Federal Reserve had made those funds available through the banks, just for that purpose, and allowed the banks to require no other collateral than the skyrocketing value of the land itself—and to loan the money at the lowest commercial interest rates in the world?


Americans who ask themselves how the Japanese managed to buy up a quarter of California’s banking market in such a short time, how they effortlessly outbid all comers for the Rockefeller Group or any of dozens of other major and minor U.S. corporations, or how they are so rapidly and successfully transferring manufacturing onto an international base after decades of insisting that such a thing was impossible, will find large elements of the answer in Tokyo’s real estate listings. The creation of massive amounts of paper assets, the collateralization of them through huge volumes of low-interest lending against such assets, or the realization of cash based on the same assets through the volcanic upwelling of share prices on the Tokyo stock market, and the export of the resulting capital through conversion of the yen into vastly cheapened dollars is a process that defines both how big and far-reaching this new Japanese “money machine” is. It also shows how simply and efficiently it works.

The Japanese can now afford to buy whatever they want that is for sale in capital, financial, manufacturing, high-technology, knowledge-intensive, distribution, processing, and services industries anywhere in the world. And they can afford to outbid anyone else who might want it. Like a fully realized version of the apocryphal oil sheik of the 1970s, they now have a virtually endless source of cash flowing right out of the ground at their feet—and encounter no risk or any other discomforting accountabilities in spending it.

Perhaps the greatest surprise of Japan’s money machine, however, and the United States’s greatest vulnerability to it, is the paradox that it is really built on no foundation. Since Japanese land is the nation’s only tradable commodity not subject, directly or indirectly, to the disciplines and interventions of the international market, the land’s value is whatever the Japanese owners and the lenders who finance the trade in it say it is. The higher the prices go, the brighter the economic future for both the owners and their creditors. And the prices are still going up.

Land speculating is, of course, as old a practice in Japan as it is in any capitalist country. But a big inflator of the bubbles in Japan has always been the favorable climate of government attitude: little land regulation; less land-use policy; low tax rates and loophole-ridden tax laws on capital gains from land; and strictly regulated interest rates and artificially mandated credit ratings that have allowed major players, such as trading companies, and minor ones, such as real estate agencies, to raise speculative capital easily at low cost, no matter how high the debt-to-equity ratio on any corporation’s books.